Blur's presence in the NFT industry has rapidly gained acclaim, and its lending platform, Blend, is poised to do the same. Since its inception in May, Blend has experienced a meteoric rise in popularity, surpassing its rivals and significantly boosting the total value of NFT loans.
In a span of just 22 days, Blend managed to amass an impressive trading volume of 169,900 ETH (equivalent to $308 million) based on data from DappRadar. What's even more remarkable is that this figure accounts for approximately 82 percent of the total lending volume across all NFT lending platforms, which amounted to around $375 million. This extraordinary achievement underscores Blend's dominant position in the NFT lending space within a remarkably short timeframe.
Furthermore, Blend's market share is expected to grow further as its range of offerings expands. Presently, the platform facilitates loans supported by four NFT collections: Miladys, Azukis, DeGods, and wrapped versions of CryptoPunks. However, Blur recently revealed its plans to introduce lending services for Clone X, with additional projects anticipated to be included in the near future. With this expansion on the horizon, Blend is poised to solidify its position in the NFT lending sector and attract an even larger user base.
Following the earlier achievements of Blur, Blend has now made its mark in the NFT lending market. Delphi Digital's analytics indicate that shortly after its launch, Blur captured 53% of the market share in the NFT marketplace, surpassing OpenSea and establishing itself as the leader. A major contributing factor to this success was Blur's native token airdrop in Q1 2023, which resulted in a substantial surge in Ethereum's NFT trading volumes.
However, despite Blend's remarkable market dominance, it's important to acknowledge that utilizing NFTs as loan collateral does come with inherent risks.
Blend provides borrowers with the opportunity to leverage their NFTs as collateral for loans, enabling them to set loan terms and receive Ethereum from lenders while retaining their NFTs as collateral.
While the prospect of acquiring high-value NFTs or other items without immediate funds may seem enticing, it's crucial to consider the potential drawbacks associated with such practices. One particular concern arises when the floor prices of the pledged NFTs unexpectedly plummet.
An incident in 2022 serves as a prime example of the risks involved. During that time, the prices of Bored Ape Yacht Club (BAYC) NFTs plummeted by 80% within a six-week period. Individuals who had heavily relied on their Apes as collateral for loans found themselves facing margin calls, which occur when lenders demand additional collateral to offset the decreased value of the asset.
However, despite these potential pitfalls, Blur continues to forge ahead. On May 24, the company unveiled a new feature that allows users to extend their loans by making a partial payment of as little as 0.1 ETH, rather than being required to repay the entire amount at once. This development demonstrates Blur's commitment to providing flexible solutions to its users.
This strategic maneuver is expected to not only retain the current user base but also entice new participants to join the platform. While Blend's swift rise in the NFT lending market is undeniably remarkable, it remains crucial for users to comprehend and effectively navigate the inherent risks associated with utilizing NFTs as loan collateral. Awareness and careful consideration of these risks are essential for all participants involved.
